The Texas A&M University System Internal Audit Department SECOND QUARTER REPORT FISCAL YEAR 2010

Transcription

1 SECOND QUARTER REPORT FISCAL YEAR 2010 March 16, 2010

2 Second Quarter Report Fiscal Year 2010 TABLE OF CONTENTS Prairie View A&M University Review of Physical Plant Operations Texas A&M University Corpus Christi Review of Human Resources Processes Texas A&M University Central Texas Review of Human Resources Texas A&M University Review of Student Health Center Texas A&M International University Review of Student Health Services Texas A&M University Review of Education Research Center West Texas A&M University Review of Student Recruitment, Admissions, and Enrollment Management The Texas A&M University System Review of Construction Projects THECB Reporting

3 Prairie View A&M University: Review of Physical Plant Operations PROJECT SUMMARY Overview Table of Contents Project Summary... 1 Detailed Observations... 3 Basis of Review Audit Team Information Distribution List Controls within certain areas of Prairie View A&M University s Physical Plant operations require improvement to ensure that resources are used efficiently and effectively and in compliance with laws, policies, regulations and University rules. Inventory management controls need to be strengthened to properly safeguard and manage the parts and materials maintained in stock which were valued at over $370,000. Other improvements needed included more comprehensive documentation of the process for establishing Physical Plant billing rates and cost allocations in order to demonstrate compliance with A&M System regulations. Also, increased compliance is needed in regards to the administration of Physical Plant construction projects and the procurement of goods and services. The University s Physical Plant reports to the Office of Business Affairs. The department performs a wide range of services to the University including utility operations, building maintenance, custodial services, construction management, grounds maintenance, and transportation services. Summary of Significant Results Warehouse Inventory Controls over warehouse inventory processes are weak in certain areas and require improvement to ensure that resources are properly accounted for and used efficiently and effectively to achieve the department s objectives. Improvements needed include maintaining updated and accurate inventory records, periodically counting and reconciling physical inventory to the inventory records, enhancing the process for ordering inventory items, and tracking excess inventory. Weaknesses in controls over the Physical Plant s warehouse inventory operations increase the risk for inappropriate and inefficient use of inventory resources. Use of a single work order system to track current inventory and further centralizing inventory stock would better Second Quarter, Fiscal Year 2010 Page 1 Project #

4 Prairie View A&M University: Review of Physical Plant Operations facilitate the implementation of strong inventory controls and enhance the efficiency and effectiveness of inventory processes. Summary of Management s Response Scope Management appreciates the System Internal Audit Department s efforts to identify issues needing improvement and steps necessary to ensure that improvement is achieved. We are committed to satisfactorily addressing these issues and have developed and enhanced procedures to address these issues. The review of financial and management controls within the University s Physical Plant focused on the areas of warehouse inventory management, billing rates and cost allocations, construction administration, procurement of goods and services, power plant redundancy, and deferred maintenance processes. Transactions and activities were reviewed primarily for the period September 1, 2008 through September 30, 2009, with some additional controls reviewed as of November Fieldwork was conducted from October through December Page 2 Second Quarter, Fiscal Year 2010 Project #

5 Prairie View A&M University: Review of Physical Plant Operations OBSERVATIONS, RECOMMENDATIONS, AND RESPONSES 1. Warehouse Inventory Observation Controls over warehouse inventory processes are weak in certain areas and require improvement. Warehouse inventory items being maintained in stock at the Physical Plant had a total cost of over $370,000 as of the date of test work. The following conditions were noted regarding controls over this inventory: Inventory listings generated from two of the three automated work order systems currently being used at the Physical Plant and the one manual inventory system in use were not accurate. In many cases these listings were not fully updated and/or contained handwritten entries. Physical counts performed of 50 inventory items selected from these listings resulted in 18 or 36% that differed by more than 10% or $100 from inventory records. In addition, seven or 14% of the inventory items tested did not have a unit cost included on the inventory listing or had a unit cost on the inventory listing that did not agree with the unit cost displayed on the corresponding invoice. Physical controls over inventories and other assets require that they be secured physically and periodically counted and compared with amounts shown on control records. Two Physical Plant warehouses (Grounds Maintenance and Custodial Services) did not perform reconciliations between the inventory records and the physical inventory in accordance with University Physical Plant inventory procedures. One Physical Plant warehouse (Central Utilities) did not have a procedure in place to perform inventory reconciliations. As a result, inappropriate or inefficient use of inventory resources could go undetected. Inventory reorder points are not always developed and reviewed to ensure the needs of specific maintenance or Physical Plant shops are met in an efficient and effective manner. Inaccurate inventory data in the work order system limits the ability to effectively use inventory reorder points reducing the efficiency of the ordering process. All five Physical Plant warehouses contained excess and obsolete inventory items which were not being tracked. For Second Quarter, Fiscal Year 2010 Page 3 Project #

6 Prairie View A&M University: Review of Physical Plant Operations 1. Warehouse Inventory (cont.) instance, excess supplies and materials remaining at the end of construction projects are not added to the warehouse inventory which increases the risk that these assets could be misappropriated. In addition, unnecessary purchases could occur for supplies and materials already available resulting in an inefficient use of resources. Storage and maintenance of obsolete inventory also increases warehousing costs and the risk that inventory items are subject to misappropriation. Lack of adequate controls over the Physical Plant s warehouse inventory operations increases the risk for inappropriate and inefficient use of inventory resources. Current inventory operations are mostly decentralized. Each Physical Plant division maintains its own supplies and equipment warehouse or storage unit. In addition, three separate automated work order systems are currently being used at the Physical Plant. As a result, resources available for managing the inventory of supplies and materials are spread between these multiple warehouse locations and work order systems which inhibits the ability to effectively and efficiently manage this inventory. The Committee of Sponsoring Organizations Report, Internal Control Integrated Framework, states that as a physical control Equipment, inventories, securities, cash and other assets are secured physically, and periodically counted and compared with amounts shown on control records. Physical Plant inventory procedures require periodic inventory counts and reconciliations for four of the five current Physical Plant inventory locations. Recommendation In order to strengthen controls over warehouse inventory, the University should: Perform a count and reconciliation of inventory at all Physical Plant warehouses (including satellite locations) in accordance with current Physical Plant inventory procedures. Promptly investigate and correct all differences noted. Complete the migration of the manual central utilities inventory records into the TMA work order system. Develop written procedures for performing periodic reconciliations of the Central Utilities inventory records with actual inventory items in the warehouse. Ensure warehouse staff has the necessary knowledge, skills and abilities in warehouse management, and provide periodic training on the work order system and inventory management as needed. Page 4 Second Quarter, Fiscal Year 2010 Project #

7 Prairie View A&M University: Review of Physical Plant Operations 1. Warehouse Inventory (cont.) Establish inventory reorder points and periodically review these reorder points to ensure that they effectively and efficiently address current Physical Plant maintenance and shop needs. Solicit input from the various shop supervisors on ordering supplies and the quantities needed on hand to limit inventory to those items actually needed or used in the specific maintenance shop. Add excess supplies that have continuing value to the University such as those remaining from construction projects or other Physical Plant activities to the warehouse inventory records and ensure these items are properly safeguarded and accounted for. Consider these items prior to ordering similar items for increased efficiency of inventory purchases. Send obsolete inventory items to be surplused. Utilize one primary work order system for all warehouse inventories to the extent possible and consider further consolidating all inventory items within one main warehouse operated with trained inventory staff. The main warehouse could house bulk inventory and distribute inventory items to satellite locations as requested. This would help streamline inventory operations by allowing implementation of centralized inventory controls such as one inventory reconciliation and one physical security structure to maintain for the majority of the inventory. In addition, having one primary work order system would facilitate increased utilization and functionality of this system which could provide more opportunities to automate current inventory processes such as the planned use of bar coding. More accurate and real-time inventory information would also be available to assist with ordering inventory and performing periodic spot checks and reconciliations. Management s Response We agree with your recommendations, and we are implementing the following process to strengthen controls over warehouse inventory. The Physical Plant management will conduct the following: The Physical Plant management will perform a base inventory count of inventory as well as a formal physical inventory and reconciliation count. Management will develop formal written procedures for performing periodic reconciliations of the Central Utilities inventory records. Management will continue its efforts to complete the migration of the manual central utilities inventory records into the work order system. Second Quarter, Fiscal Year 2010 Page 5 Project #

8 Prairie View A&M University: Review of Physical Plant Operations 1. Warehouse Inventory (cont.) University management will determine the current size and features of the warehouse and determine if a more consolidated warehouse system is required. University management will determine warehouse configuration, staffing needs, and provide periodic training to employees on the work order system and inventory management. Re-order points for high usage items have been implemented in the Facilities Maintenance department and continues to be refined as changes in material requirements occur. The Physical Plant management will establish a computerized data base for excess items. The Physical Plant management is currently moving in the direction of consolidating inventories. As the current TMA upgrade progresses, we expect to achieve efficiencies afforded by the consolidation of work order systems and inventories. Currently, funding has been identified and approved to organize and reconcile all Facilities Maintenance inventory locations. Central Utilities and Transportation/Grounds are in the process of moving appropriate work requests and inventories to the TMA System. The University is in the process of trying to identify space that will allow all warehouse inventory to be in one location. Implementing Cycle Counts throughout Physical Plant inventories will greatly enhance accountability and accuracy of our reconciliations. This process will be implemented by February 28, Billing Rates and Cost Allocations Observation Documentation of billing rates and cost allocations is not in compliance with A&M System regulations. Comprehensive written procedures have not been developed for establishing billing rates and allocating costs at the Physical Plant. In addition, portions of the rate setting and cost allocation process are not adequately documented with supporting schedules and other accounting records in compliance with A&M System regulations. The University s use of a direct chargeback method for recovering most costs has limited the need for extensive rate setting documentation. However, additional supporting documentation is needed for various estimates and overhead allocations used during the rate calculation process. In addition, rates and corresponding accounting records related to costs, revenues, billings, collections, and surpluses or deficits are not Page 6 Second Quarter, Fiscal Year 2010 Project #

9 Prairie View A&M University: Review of Physical Plant Operations 2. Billing Rates and Cost Allocations (cont.) established and adjusted annually for each separate service provided. A&M System Regulation states that each System component is responsible for establishing user rates, maintaining proper documentation of rate calculations, verifying that rates are not discriminatory towards different groups of users, and periodically reviewing operations for compliance. Without adequate supporting documentation there is a greater risk that billing rates are not set to recover the costs of providing the respective services. In addition, educational and general funds could indirectly be used to subsidize auxiliary enterprises, which is prohibited. Recommendation Develop and implement comprehensive internal documentation for the rate setting and cost allocation process at the Physical Plant. This documentation should include written procedures and other supporting schedules and accounting records used to establish rates and allocate costs for each service provided, especially those that are not based upon the direct chargeback method. Ensure that the requirements within A&M System Regulation , Service Departments, are incorporated into this process and the related procedures. Coordinate with the Business Office for assistance in establishing these rates and the supporting schedules and accounting records as needed. Management s Response We agree with your recommendations, and we are implementing a formal process for comprehensive internal documentation for the rate setting and cost allocation. The Physical Plant management will develop and implement written procedures for rate settings and cost allocation and ensure these procedures are established within the A&M System Regulation A list of services will be developed that require rate settings and cost allocations. Upon completion of the list, a template will be developed to contain completed revenue and expenditure patterns. This template will show adjustments for fewer expectations discovered and submit an annual report to the Vice President of Business Affairs for the proposed rates of documents. These activities are being implemented and will be completed by August 31, Second Quarter, Fiscal Year 2010 Page 7 Project #

10 Prairie View A&M University: Review of Physical Plant Operations 3. Construction Administration Observation Construction projects tested were not in compliance with various construction administration requirements. The Physical Plant has comprehensive procedures for administering construction projects, but did not comply with these procedures in certain situations. Testing performed on four of the eight construction projects initiated during the audit period identified instances of noncompliance with construction procedures as follows: The bid opening did not occur at least 21 days after the last advertisement publication date as required for one of the four projects tested. In addition, no documentation of the last publication date was available for another of the four projects tested in order to determine compliance with this requirement. Without allowing sufficient time between the bid advertisement and bid opening an adequate vendor response to minor construction projects may not be achieved and thus the best bid available may not be received. Adequate proof of compliance with skilled trade license requirements was not provided for three of the four projects tested. Lack of evidence of proper licenses for skilled tradesmen used by the contractor increases the risk that construction projects do not meet required quality standards. The contractor was not paid within 30 days following the completion date of the project as required for two of three projects tested. Untimely payments to construction contractors could impact the ability to attract good contractors for future construction projects which could lead to fewer bids and higher costs. University and A&M System construction procedures require that the bid notification precede the bid offering or vendor selection process by at least 21 days and indicates that four weeks or more for the bidding process is an accepted industry standard and should be used except in unusual circumstances. In addition, construction procedures indicate that the contractor shall comply with all applicable provisions of state law related to license requirements for skilled tradesmen, contractors, suppliers and/or laborers, as necessary to accomplish the work. Also, the final payment is due and payable on the 31st day following the owner's approval of the final application for payment by the contractor, subject to all allowable offsets and deductions. Page 8 Second Quarter, Fiscal Year 2010 Project #

11 Prairie View A&M University: Review of Physical Plant Operations Recommendation 3. Construction Administration (cont.) Develop further procedures/checklists and increase monitoring as necessary to better ensure that: The bidding process for construction contracts is in compliance with the University and System construction procedures and requirements. All required documentation (bid documentation, insurance, skilled trade licenses, etc.) is obtained and included in the construction contract project folders at the Physical Plant Construction and Planning office. Contractors are paid within 30 days of the project completion date. Management s Response We agree with your recommendations, and we are developing formal procedures to increase monitoring of construction contracts. The Physical Plant management will conduct the following: The Physical Plant management, in conjunction with the Procurement Office, will develop a formal process to ensure the bidding process is in compliance with University and System requirements, required documentation is maintained, and contracts are paid within 30 days of the project completion date. This process will be implemented by November 30, Procurement Receiving Documentation Observation Inadequate receiving documentation was provided for goods and services purchased. University procurement procedures were not routinely followed in regards to receiving documentation. These procedures are available, both online and manually, to provide guidance for the procurement process. Physical Plant purchases did not adhere to, or comply with, the required procedures as noted below: For 13 of 57 (23%) vouchers tested, no supporting documentation was included in the voucher packet indicating that the goods or services were received prior to payment as required by University procurement procedures. In some cases, Central Receiving did not forward the receiving information to Second Quarter, Fiscal Year 2010 Page 9 Project #

12 Prairie View A&M University: Review of Physical Plant Operations 4. Procurement Receiving Documentation (cont.) Accounts Payable. In addition, Accounts Payable did not require receiving documentation for several of these vouchers due to the fact that the voucher was less than $250 or was for a recurring charge related to monthly service contracts. For 23 of 57 (40%) vouchers tested, Accounts Payable obtained confirmation of the receipt of goods and services by ing the department. The PVAMU Administrative Procedures Manual indicates that all goods delivered to the University should be delivered to the Central Receiving Warehouse, where a receiving report will be prepared and sent to the Accounts Payable Office. If the goods are received directly by the requesting department, it is responsible for providing proof of delivery to the Accounts Payable Office. In addition, all services provided to the University are generally provided to the applicable department who will provide the Accounts Payable Office with proof of delivery. Often this will be a signature on a copy of the invoice. In the case of a personal services contract, it will be a memo stating the services were provided. Without adequate receiving documentation there is a greater risk that payments could be made to vendors for goods and services not actually received. Recommendation The University should ensure that adequate receiving documentation is obtained for all goods and services purchased and provided to Accounts Payable in accordance with University procurement procedures. Personnel, including reviewing supervisors, involved in the purchasing process should be adequately trained on purchasing procedures and requirements. All purchases not in compliance with required procedures should be returned to the originators and not processed until corrected. Work with Central Receiving to correct processes needed to ensure that receiving documentation is submitted to Accounts Payable in a timely manner. Also determine whether use of confirmations is an acceptable practice under the current University procurement procedures and update these procedures as necessary. Management s Response We agree with your recommendations related to procurement receiving documentation. The University will conduct the following: Page 10 Second Quarter, Fiscal Year 2010 Project #

13 Prairie View A&M University: Review of Physical Plant Operations 4. Procurement Receiving Documentation (cont.) The University will ensure adequate receiving documentation is obtained for all goods and services purchased in accordance with University procurement procedures. The University will ensure training is provided to all personnel involved in the purchasing process. All purchases not in compliance will be returned to the originator and not processed until corrected. The University, in conjunction with Central Receiving, will ensure receiving documentation is submitted to Accounts Payable timely. The University will review the current University procurement procedures and determine whether confirmation is acceptable and revise procedures accordingly. This process will be implemented by May 31, Second Quarter, Fiscal Year 2010 Page 11 Project #

14 Prairie View A&M University: Review of Physical Plant Operations BASIS OF REVIEW Objective Criteria The objective of the audit was to review and assess financial and management controls at the University's Physical Plant to determine if resources are used efficiently and effectively and in compliance with laws, policies, regulations, and University rules. Our audit was based upon standards as set forth in the System Policy and Regulation Manual of The Texas A&M University System; Prairie View A&M University rules and procedures, the Texas A&M University System Construction Procedures Manual; the Texas Building and Procurement Commission Procurement Manual; the Treadway Commission s Committee of Sponsoring Organization s Internal Control - Integrated Framework (COSO); and other sound administrative practices. This audit was performed in compliance with the Institute of Internal Auditors International Standards for the Professional Practice of Internal Auditing. Additionally, we conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Background The University s Physical Plant reports to the Office of Business Affairs. The mission of the Physical Plant is to create, maintain and support educational facilities that promote excellence in teaching, research and service. To achieve this mission the Physical Plant has four primary functional divisions which provide most of the physical plant operations for the University. The four divisions include Facilities Maintenance, Central Utilities, Campus Maintenance, and Construction and Planning which together comprise approximately 110 full-time positions that report to the Assistant Vice President of Physical Plant. These functional divisions perform a wide range of services to the University including utility operations, building maintenance, custodial services, Page 12 Second Quarter, Fiscal Year 2010 Project #

15 Prairie View A&M University: Review of Physical Plant Operations construction management, grounds maintenance, and transportation services. The Physical Plant has a fiscal year 2010 operating budget of over $10 million and is responsible for maintaining approximately 119 buildings with over 2.4 million square feet and 350 acres in grounds. AUDIT TEAM INFORMATION Dick Dinan, CPA, Director Brian Billington, CPA, Project Manager Mark Heslip Darwin Rydl, CPA DISTRIBUTION LIST Dr. George C. Wright, President Ms. Mary Lee Hodge, Vice President for Business Affairs Mr. Richard Norton, Assistant Vice President of Physical Plant Ms. Lydia Cavanaugh, Manager of Compliance Second Quarter, Fiscal Year 2010 Page 13 Project #

16 Texas A&M University Corpus Christi: Review of Human Resources Processes PROJECT SUMMARY Overview Table of Contents Project Summary... 1 Detailed Observations... 3 Basis of Review Audit Team Information Distribution List Human resources processes at Texas A&M University Corpus Christi provide reasonable assurance for compliance with A&M System policies and regulations except in the areas of mandatory employee training, staff annual goal setting, and position description reviews. While the University s hiring processes provide a framework to guide faculty and staff searches, they do not adequately prescribe firm standards for compliance with University rules. The current informal hiring procedures are nebulous and comprised of mostly recommendations that do not set clear expectations for human resources processes. The University s human resources management function is shared between the Human Resources department and the Equal Opportunity & Employee Relations (EOE) department. The Human Resources department currently has seven full-time employees while EOE has two. Summary of Significant Results Compliance with A&M System Regulations The University s guidance and monitoring over mandatory employee training do not ensure compliance with System regulations. The review found high compliance error rates for timely completion of mandatory training. In addition, the review found issues with goal setting, position description updates, and a lack of a University rule regarding compensation and classification. Summary of Management s Response Management is in agreement with the recommendations from the review of human resources processes. Management is taking necessary actions to improve processes related to mandatory training for employees, staff annual performance evaluations, compensation and classification, faculty and staff hiring, and employee terminations. Second Quarter, Fiscal Year 2010 Page 1 Project #

17 Texas A&M University Corpus Christi: Review of Human Resources Processes Scope The review of human resources processes focused on hiring processes, performance evaluations, and employee training for the period of September 1, 2007 to October 31, The fieldwork was conducted from October to November, Page 2 Second Quarter, Fiscal Year 2010 Project #

18 Texas A&M University Corpus Christi: Review of Human Resources Processes OBSERVATIONS, RECOMMENDATIONS, AND RESPONSES 1. Compliance with A&M System Regulations 1a. Mandatory Employee Training Observation The University s mandatory employee training program does not ensure timely completion of required training. The University s employee training processes do not ensure employees complete mandatory training in a timely manner, as required by System Regulation (within 30 days from the time of hire for new employees, and every two years for existing employees). The untimely completion of mandatory training varied from 13 to 730 days late. The purpose of the mandatory training is to make new hires aware of their responsibilities as an employee of the System, and to remind current employees how to respond in certain situations to minimize risk to them and to the System. The details of noncompliance (i.e. employees who did not take required training in a timely manner) by training course and employee category are summarized in the table below: Employee Training Non-Compliance Rates Employee Type Reporting Fraud, Waste and Abuse Orientation to A&M System Ethics Employment Discrimination and Sexual Harassment Information Security Awareness Summary of error rates for New Employee Training Student New Hires Faculty New Hires Staff New Hires 77% (23/30) 43% (13/30) 17% (5/30) 77% (23/30) 50% (15/30) 17% (5/30) 70% (21/30) 20% (6/30) 13% (4/30) 70% (21/30) 20% (6/30) 13% (4/30) 50% (15/30) 17% (5/30) n/a Summary of error rates for Supplemental Employee Training Faculty n/a n/a Staff n/a n/a 68% (41/60) 57% (17/30) 63% (38/60) 50% (15/30) 92% (55/60) 93% (28/30) Second Quarter, Fiscal Year 2010 Page 3 Project #

19 Texas A&M University Corpus Christi: Review of Human Resources Processes 1a. Mandatory Employee Training (cont.) Current University procedures assign the responsibility for ensuring new hires receive all the required training to the relevant supervisor. In addition, the Equal Opportunity and Employee Relations Office (EOE) is responsible for monitoring to ensure compliance. While the training database is designed to send reminders to employees and their supervisors, management indicated that it has chosen to not use this feature. This makes EOE s monitoring and follow-up the only reminder and monitoring process available to the employees and their supervisors. This elevates the University s risk of noncompliance since EOE only has two full-time employees who appear to be over-extended. EOE is responsible for employee training, employee relations, equal opportunity, affirmative action, and grievances, providing search committees with guidance and monitoring for the faculty hiring process, and conducting and/or gathering information related to exit surveys. Recommendation Improve compliance with mandatory training requirements and implement a more robust monitoring process. Management s Response Management concurs and has already taken the following actions: Mandatory training and strategies for improvement of training as well as new Train Traq features were discussed at the President s Cabinet and other campus council meetings in January Monthly completion rate reports are being provided to all Division Heads and Deans. Monthly A&M System training notifications have been reactivated effective January 28, As of January 2010, managers have been notified and have the tools to be actively engaged in the reviewing of their employees training status utilizing the new Train Traq features. The Equal Opportunity/Employee Relations Office will actively monitor employee training and will work with managers to improve performance on the 30-day new employee-training requirement. 1b. Staff Annual Performance Evaluation Observation The staff annual performance evaluation process does not provide for accountability and compliance with A&M System regulations. The University s staff annual performance evaluation process does not ensure employees set goals or are held accountable for the accomplishment of their individual annual goals. In addition, the process does not ensure the position description is reviewed by both employee and supervisor, as part of the evaluation. Page 4 Second Quarter, Fiscal Year 2010 Project #

20 Texas A&M University Corpus Christi: Review of Human Resources Processes 1b. Staff Annual Performance Evaluation (cont.) Thirty percent (9 out of 30) of staff evaluations reviewed did not include performance goals and objectives. This is partly due to the University rules and procedures failure to communicate clear expectations regarding goal setting for staff. In addition, the University s employee annual performance evaluation tool does not facilitate goal setting. Discussions with management indicated that the evaluation tool has not been revised in ten years. As stipulated in System Regulation , the purpose of employee performance evaluations is to inform employees of the quality of their work, to identify those areas needing improvement, set specific objectives for employees, and provide an opportunity to discuss career goals and the support needed to meet those goals. Goals also assist managers in evaluating their workforce, identifying employee potential, and establishing priorities for training, education, compensation and reward. In addition, goals establish the basis for employee accountability and related decisions. Sixty-seven percent (20 out of 30) of the evaluations reviewed did not have evidence that a review of the position description was performed as part of the evaluation process. A&M System Regulation requires the employee and supervisor to review the duties listed on the position description and update where necessary as part of the evaluation process. In its instructions on annual performance evaluations that were disseminated six weeks before the evaluations were due, Human Resources reiterated the requirement to review the position description. Human Resources also provided instructions on how to review and update the position description with the new online system. A small box where employees and supervisors check for having reviewed the position description could significantly improve compliance. The University s current evaluation tool does not have such a feature. Recommendation Improve compliance with A&M System Regulation requirements regarding employee goal setting and review of position descriptions. Consider requiring supervisors to take performance management training and revising the University s evaluation tool so that it facilitates goal setting and the employee and supervisor s review and update of the position description. Management s Response Management concurs and is taking the following actions: A new performance evaluation tool has been drafted and was made available for use beginning February 1, The new evaluation Second Quarter, Fiscal Year 2010 Page 5 Project #

21 Texas A&M University Corpus Christi: Review of Human Resources Processes 1b. Staff Annual Performance Evaluation (cont.) tool requires supervisors to: 1) confirm that the position description has been reviewed and necessary updates made; 2) indicate whether or not an employee has completed all mandatory training; and 3) evaluate the status of last year s goals and establish goals for the new year. Training scheduled in February 2010 will emphasize the requirements of A&M System Regulation University rules and procedures are being updated to emphasize the establishment of annual goals and will be completed by April 15, c. Compensation and Classification Observation The University has not established formal compensation and classification procedures. The University has not established and communicated salary administration rules, procedures and pay plans for all categories of positions. This elevates the risk of noncompliance with A&M System Regulation Discussions with management indicated that due to current staffing levels, Human Resources management has, in general, not made publishing rules or procedures a priority. Recommendation Develop and implement a rule and written procedures to guide compensation and classification, as required by A&M System Regulation Management s Response Management concurs and is taking the following actions: Formal compensation rules and procedures are being written to guide management in making fair and equitable decisions related to new hires, promotions, transfers, demotions and other compensation related decisions. The target completion date for a final draft is April 1, The fiscal year 2010 pay plan is posted on the HR web site. 2. Compliance with University Rules and Procedures 2a. Faculty Hiring Observation The University s faculty hiring procedures do not ensure operational efficiency and compliance with University rules is not documented. The University s faculty hiring procedures do not ensure hiring files comply with relevant University rules and the University s Search Committee Guide. The University has not communicated clear Page 6 Second Quarter, Fiscal Year 2010 Project #

22 Texas A&M University Corpus Christi: Review of Human Resources Processes 2a. Faculty Hiring (cont.) expectations regarding the documentation required to be maintained for supporting hiring decisions. Additionally, a number of the University procedures are duplicative and present opportunities for streamlining to improve efficiency and compliance. The following issues were noted: For 42% (5 out of 12) of the faculty hiring decisions reviewed, the hiring file did not include an applicant pool record to document the reasons for hire or non-hire for each applicant considered, as required by the University s Search Committee Guide. For 83% (10 out of 12) of the hiring decisions reviewed, there is no evidence of the provost s prior approval of the academic department s Request to Recruit. University Rule C1.01, Recruitment & Appointment of Faculty, requires all Requests to Recruit be forwarded to the provost for review and approval. While noncompliance could be mainly due to search committee oversight, provost approval may be seen as duplicative since the provost approved the faculty position during the budgeting process. EOE management indicated it is planning on discontinuing this requirement with the new online applicant tracking system. There is no evidence of an EOE meeting with the search committee for 83% (10 out of 12) of the hiring decisions reviewed. University Rule C1.01 requires the EOE to advise college search committees and administrators and provide them with written guidelines for conducting searches. For 33% (4 out of 12) of the hiring decisions reviewed, there is no evidence that a search committee was involved. University Rule C1.01, Recruitment & Appointment of Faculty requires the dean to appoint a search committee to develop a pool of qualified applicants, review the applicants, and interview those who appear to be best qualified. EOE management indicated it is confident that departments are utilizing search committees for the selection process and that the issue is inadequate documentation of search committee activities. For 33% (4 out of 12) of the hiring decisions reviewed, there is no evidence of the EOE s prior approval of the advertisement in accordance with University rules. In addition, for 33% (4 out of 12) of the hiring decisions reviewed, there is no evidence of the provost s approval of the advertisement. University Rule C1.01 requires advertisements to be reviewed in advance by the provost and the director of EOE. EOE management indicated it is confident that the advertisements Second Quarter, Fiscal Year 2010 Page 7 Project #

23 Texas A&M University Corpus Christi: Review of Human Resources Processes 2a. Faculty Hiring (cont.) were reviewed and that the issue is that of missing documentation. The provost s approval of the advertisement may be duplicative, following the provost s approval of the budget and the Request to Recruit. EOE management has not provided faculty search committees with formal clear expectations on the minimum requirements for hiring file documentation. The Equal Opportunity & Employee Relations Search Committee Guide, which includes many good ideas, is not strictly adhered to because it does not comprise sanctioned rules or pronouncements, but rather numerous recommendations. Management indicated the necessity to provide numerous recommendations as a way to provide search committees with flexibility. However, the flexibility has resulted in many inconsistencies and a high rate of noncompliance with University rules. Without a checklist, it is difficult for search committees to identify the minimum documentation requirements in an efficient manner. In addition, without a checklist, it is difficult for EOE to monitor hiring files for compliance in an efficient manner. The noncompliance may also be due to a lack of monitoring by the EOE. While Section 5 of University Rule C1.01 requires faculty-hiring files to be submitted to EOE, some departments have not submitted the files. For the faculty-hiring files reviewed, 17% (2 out of 12) had not been submitted to EOE, despite the hires having been finalized in September In the cases where the hiring department submitted the files to EOE, it had not reviewed them to ensure that the documentation provided adequate justification for the selection in a consistent manner. The University does not require search committee members to take hiring training as a prerequisite to their involvement in recruiting faculty. Training would provide them with the knowledge of the key requirements. Recommendation Improve compliance and operational efficiency of current faculty hiring practices by implementing the following: Strengthen guidance by establishing authoritative University pronouncements/rules to communicate direction and requirements. Revise the guide so it includes clear expectations of what is required. In addition, streamline current procedures for improved compliance and operational efficiency. Monitor hiring files for compliance with requirements. Page 8 Second Quarter, Fiscal Year 2010 Project #

24 Texas A&M University Corpus Christi: Review of Human Resources Processes 2a. Faculty Hiring (cont.) Provide training to search committee members on the faculty hiring process, particularly the documentation requirements for hiring files. Management s Response Management concurs and is putting monitoring procedures in place as well as revising the guidelines and University rule to be clear regarding what is required. Monitoring procedures, revised guidelines and the University rule will be in place by April 15, Management has already taken the following actions: Developed a faculty online hiring process that will streamline hiring procedures and ensure accurate documentation is maintained. Target date for going live with the new process is March 1, A new Search Committee Briefing Checklist was developed in October To date, eleven search committees have been briefed using the new tool. 2b. Staff Hiring Observation Human Resources has not developed comprehensive written procedures to guide the hiring process. The newly implemented PeopleAdmin Applicant Tracking System provides a good framework and starting point for the staff hiring process; however, Human Resources has not implemented a rule or a set of written procedures (including standardized forms and checklists) to help hiring supervisors navigate through the process. The unwritten procedures offer too many options with little by way of officially sanctioned rules. This has created inconsistencies with hiring, as the selection processes vary from over- to under-control. For example, the procedures do not specify circumstances in which a search committee must be formed. As a result, search committees are sometimes formed when they are not essential. For example, the review revealed that search committees were used for a large number of entry-level positions such as Groundskeeper I and Administrative Assistant. Recommendation Strengthen guidance by establishing authoritative formal written procedures that communicate clear expectations for the staff hiring process. Management s Response Management concurs and is taking the following actions: The staff hiring process was recently mapped out with the assistance of a Second Quarter, Fiscal Year 2010 Page 9 Project #

25 Texas A&M University Corpus Christi: Review of Human Resources Processes 2b. Staff Hiring (cont.) consulting firm. This exercise has created the foundation to write clear and concise procedures for an improved staff hiring process. The PeopleAdmin system will be updated to generate more communication with supervisors regarding required steps. Checklists and standardized forms will be integrated to ensure all required documentation is collected. Formal written rules and procedures are being written to ensure consistency and provide guidance in staff hiring processes. The target completion date for the rule and procedure draft is April 15, Employee Termination Process Observation The current employee termination process does not remove terminated employees from the training database timely. The University s current employee termination process does not ensure employees are removed from the A&M System training database, TrainTraq, in a timely manner. As a result, TrainTraq reports are often inaccurate and misleading. For example, the outstanding employee training report from TrainTraq as of September 1, 2009 inappropriately included more than 500 individuals that were no longer employed with the University. The terminations had occurred between September 1, 2008 and August 31, Discussions with management indicated that the terminated employees status had not been appropriately updated to terminated in the Budget/Payroll/Personnel (BPP) file. Recommendation Improve the accuracy of management information systems by accurately showing employees as terminated when they separate from the University. Management s Response Management concurs and is taking the following actions: Reports are created in BPP Access database to identify employees who are no longer working and in active status. In October 2009, five hundred and forty-five employees who had not been paid since August 29, 2009 were changed from active to terminated in the BPP system. Regular reports are generated by Human Resources Office to identify employees in active status who were not paid within the last 30 days and records are updated as needed. More guidance and information are being provided to hiring units to ensure that where required, appropriate actions are taken to update employee status. Page 10 Second Quarter, Fiscal Year 2010 Project #

26 Texas A&M University Corpus Christi: Review of Human Resources Processes BASIS OF REVIEW Objective Criteria The overall objective was to analyze the University s management processes for human resources to determine if strategic and operational results and outcomes are achieved in an efficient and effective manner, and compliance with laws, policies, regulations, and University rules. Our audit was based upon standards as set forth in the System Policy and Regulation Manual of the Texas A&M University System, Texas A&M University Corpus Christi Rules and Procedures, and other sound administrative practices. This audit was performed in compliance with the Institute of Internal Auditors International Standards for the Professional Practice of Internal Auditing. Additionally, we conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Background The Texas A&M University Corpus Christi s human resources management function is decentralized between the Human Resources and Equal Opportunity and Employee Relations (EOE) departments. Human Resources aims to provide quality service in collaboration with others to promote a positive work environment. The EOE s mission is to support University employees in their employee relations, equal opportunity, and professional development inquiries. The EOE addresses issues about employment, professional development, and effectiveness. Second Quarter, Fiscal Year 2010 Page 11 Project #

27 Texas A&M University Corpus Christi: Review of Human Resources Processes AUDIT TEAM INFORMATION Dick Dinan, CPA, Director Amanda Jenami, CPA, Project Manager Lori Ellison Chris Powell Katherine Redo DISTRIBUTION LIST Dr. Flavius Killebrew, President Dr. Anantha Babbili, Provost and Vice President for Academic Affairs Ms. Jody Nelsen, Vice President for Finance & Administration Ms. Debra Cortinas, Director, Human Resources Mr. Samuel Ramirez, Director, Equal Opportunity & Employee Relations Page 12 Second Quarter, Fiscal Year 2010 Project #